Here’s my short term trading idea- time to go short.

The larger market has been chugging up the charts relentlessly, all fear virtually gone. This is not an environment that lends itself to no risk in the market.

The VIX - the measure of levels of fear in the markets, has all but disappeared. Remember, I wrote a BLOG on using the VIX as a counter intuitive tool to clue us into making trades on the over market.- VIX at or below 20- too much complacency- sell.
VIX at or above 30- too much fear- buy the market. Here’s a chart of the VIX:

As you can see, the last time the VIX was this low was back in October 9th. Sorry you can’t see the timeline, but trust me, that was the time frame.

By November, we started into one of the ugliest four months I can recall in the stock market’s history.

We’re not going into another period like that as a lot of the damage has already been priced into the market. However, I do feel we are overdue for a multi week correction.

Here’s a look at the QID- the ETF I have chosen for my own account to get into a short position:

This is the security I have chosen to take a short bet on the overall market for my own money. This is the QID- an ETF that trades inversely to the QQQQs on a 2 for 1 basis. Anotherwords, if the QQQQs go up 1%, QID will go down 2%, and vice versa.

Today, as a starting position, I picked up 2,000 shares of QID at an average cost of $38.67. I am prepared to go a little deeper, or perhaps even own some puts if we go much higher.

The only wild card- options expiration tomorrow, where things can be a little wacky. I could be prepared to go even deeper next week if the market hasn’t started a corrective phase.

Comments and questions are welcome.

The market gapped down this AM on the heels of the GE earnings missed, pushing RIMM down a couple of points. After yesterday’s rebound in RIMM, this was a heaven sent event, but only pared my losses on this idea marginally.

Had I shorted the stock, or bought the options another month out, I probably still would have made money on this trade. However, time was running short on the trade, and I couldn’t take the risk of staying in any longer.

Now, RIMM will no doubt completely fall apart and head right down the to $110 level I was looking for. I believe I lost about $9k on the 20 puts I sold today. Ouch. It’s going to take a good trade to make up for that one.

FYI:

I closed out 15 of my 35 RIMM puts today for a $2275 loss. I can handle that. The trade is not going as planned, and I took advantage of this down day to limit my loss potential. $22,500 in total capital is a lot for me in a position this speculative, so I wanted to limit my loss potential. I am hoping for another 3 point drop tomorrow. If it comes, this trade will be fine.

Also, I mentioned I had picked up 20,000 QPCI on Friday. I closed them out yesterday, and made a few hundred bucks. The stock was looking a bit tired, and I’ll revisit after it corrects a bit.

For those of you who followed the earlier posting from today’s post open, you know I took a fairly substantial high risk position, betting that RIMM was ready to enter a corrective phase after the market priced in yesterday’s earnings release before the fact. That’s my story and I’m sticking to it.

Today was a bit painful as my early entry into a short position is initally a losing trade- for now. The stock was about $121 when I entered the trade, and it closed at $122.58 after trading much higher- ouch!!!!

However, I’m sticking to my guns with this trade. I still believe the profit takers will surface in a big way once the volume quiets down.

Here’s the chart I’m looking at:

The circles show the action in volume and price at the last earnings release. Note the big gap on the release, and two huge volume bars. At this time, the volume quiets down after a couple of days, and the stocks starts giving ground.

It doesn’t bounce until it gives away a full 45 points.

However, that was the beginning of the Bear Market. We are now seeing signs of a aging Bear, or perhaps a young Bull emerging.

I’m going to simply hang in there unless the stock trades convincingly above the horizontal line at $124.50- at that point I would consider limiting my loss and closing out.

If RIMM does continue much higher and blow me out of my position at a huge loss, it will be painful for my trading money. However, on the plus side, it could be signalling the end of bear. We might go from selling the rips and buying the dips to buying momentum again. In the larger picture, that would be the far better environment for us all.

Comments and questions are welcome.

As they say in Texas Hold Em- I’m all in now, and I hope I made the right call. I added to my RIMM Puts in a much bigger way shortly after the open.

I picked up 30 RIMM April 120 Puts at $6- I’m betting the stock will correct now, and correct to the tune of 10 points or so. Once it cracks, I believe the hot money will come out, and down we go.

Right now, I’m in for 35 puts at a average cost of $6.41. Total investment- $22,500. Keeping my fingers crossed.

Sorry for the tardiness on this note.  I had an obligation today that kept me away from the computer until now. Better late than never.

RIMM delivered $.72 per share in earnings, one penny above analysts estimates. It was a great quarter, and the company doubled from the same quarter the previous year all across the board.

The stock popped in after hours trading a couple of points- it traded to a high of $122 and the last trade was $121.50. This is a heaven sent situation for a lower risk trade.

I hope the stock holds up in the $122 range for the first half hour tomorrow morning. I will be in front of my computer buying puts or shorting the stock.

The financial performance was great, but not great enough to push this stock higher.

All the hot money will come screaming out as soon as the stock shows some signs of weakness, and it will probably give back at least half of the $100 to $120 move of the last several days.

In short, these numbers were already priced into the stock before they came out, and the hot, short term money will start taking profits in earnest in the next day or two.

The ideal situation would be for the stock to trade up another point or two early in the AM, then syonara RIMM for now. Over the longer term, I’d rather be short than long. However, not tomorrow.

On RIMM- it is 50 minutes before the close, and the stock is falling apart- $115 as I write this. I am not up nicely- about $2k- going to lock in half my profits sometime before the close.

The die is cast for me on RIMM- I’m taking my shot by putting about $9k at risk with 10 April 120 puts at $8.90.

I’ll hold these into the close unless they go a lot higher, and find out what the numbers are post close. Everything I’ve read suggests the stock is going to $130 on good numbers. Usually, when everyone is saying one thing, the opposite actually happens.

As I said, if the numbers blow away even the whisper number, and the stock trades way up, I will buy more puts tomorrow morning when I believe there is some sort of peak.

If there is anything the market doesn’t like, the stock should get killed the way it has run into earnings.

It’s risky, and counter intuitive. Keeping my fingers crossed. I haven’t invested more than I can afford to lose.

For those of you who are watching the stock come back down now- you might want to cover half your short before the close today if you have a nice profit

I will be out of the office just after today’s close, so I won’t be able to post any commentary until later this evening.

I closed out the SPY trade to early, and left 2 points on the table. Not perfect, but a wise man once said I would rather be out wishing I was in. In this market, tomorrow is really another day.

And, speaking of another day, I am contemplating getting short RIMM into tomorrow’s post close earnings release.

This is a dangerous trade. RIMM has been making a lot of noise of late about how great their sales are, but the fact that the market already expects the sales to be great suggests it is already “baked into the cake” through the share price.

A quick look at the last quarterly release suggests the trade could be foolhardy. Q3 numbers came out post close 12/20, and the stock, which had closed at $105, reopened at $122- a huge gap. If you were short, you were killed.
However, on the positive side, there are a couple of big differences. Most importantly, RIMM was not trading up into the earnings release last quarter. It was flat at about $100 for the previous 3 weeks- the numbers were a big surprise to the market.

Secondly, within a week of the $122 gap, the stock was crashing back down through $100 and ended up going down to $80.

This is too good to resist for me. Ideally, I would like to see the stock up above $118 to enter the trade. However, I am going to take a small position through a put before the earnings release. If the stock gaps up big, I will double up. If the stock falls apart, I will make what I make.

I’m looking at the April 120 puts (RUL.PD)- the are trading at an obscene premium of $9- I’ll probably buy 5 of them- about a $4500 investment, and double or triple up if the stock gaps up on Thursday morning.

Will post a BLOG when I make a trade. Would love to see the stock above $118.

Update: I’ve waded in and bought 10 April 120 PUTS at $8.90 for a total investment of $8900. Looking to add to position under a couple of different scenarios.

There market liked numbers on the economy this morning, and gapped open. As such, I locked in my profits on Friday’s SPY trade. Sold at 134.29 for a net profit of $2230 in two trading days on 1,000 SPY. Just as I suggested- happy to scalp a couple of grand and move on. Now- on to thinking about RIMM.

The market had a big surge on 3/20, and there was a gapped which has been filled on today’s pullback.

The market’s put in an impressive performance on the heels of a very bad week on news flow- nothing but bad economic numbers this week. A flat market with such bad economic news suggests it is all priced in to me.

I went long 1,000 SPYs today at $132.06- that’s the ETF for the S&P 500. Looking for a couple of points on this trade next week. More later when I have more time.

I closed out my put option trade on LEH this AM, at $5.50- happy to net $3,000 on an $8,000 trade in three trading days. The stock has been down three straight days, and that’s enough for me. Buy the dips, sell the rips.

My two open trades paid off huge since Friday, and I can only chalk it up to pure, dumb luck.

I closed both of them out just after the market opened today.

My Thursday trade on the QQQQs was sabotaged by the news over the weekend of the demise of Bear Stearns and the 1/4 point rate cut by the FED. The markets swooned on Monday morning, and took me way out of the money.

However, as I published in the BLOG yesterday morning, with blood in the financial streets, I took the plunge and waded in for 500 shares of Goldman Sach- GS- at $144.25- I didn’t publish this second trade as I was traveling, but I did pick up another 500 at $143.

It was not lucky to be in the position as it was my call, but it was pure dumb luck that GS was posting earnings pre open, and they blew away the numbers. I closed out both positions, choosing to be flat with my trading money going into the FED news today.

Net result: $21k profit on my GS trade, $1100 loss on QQQQ option trade, and happy to be out.

I am now content to be in cash with my trading money and wait for the next severe, knee jerk from the markets to make a trade by going the other way.

I finally bought some Gold today- but it wasn’t the metal- I stepped up and bought Goldman Sachs (NYSE: GS) - 500 shares at $144.25.

There is absolute blood in the streets on the financials- they are so oversold it is kind of absurd.

GS is the absolute gold standard of investment banks, and I have been watching for a huge down crazy day to make a trade in this one.

I first looked at the March 145 options- believe it or not, they wanted $10 for those options- I think I’ll sell some against my 500 shares now. That’s nuts- I won’t pay that kind of premium.

Back to the screens- more on this later.

The VIX spiked up over 31 today on the news that Bears Stearns (NYSE: BSC)  has become illiquid.  This  is a big  fear  day, and a good time to go long.

I bought QQQ.DP - the April QQQQ calls at $42 for $1.97. Let’s see what happens next week. Take the plunge if you want.

For all those who are following the trade:

I closed out my Time Warner trade today with a quick $1,000 pre fees profit. Monday at the open, I picked up 100 March 16 calls at $.65- sold today for $.75 on a $6500 investment in less than two trading days.

I also closed out a position which I hadn’t published in this BLOG for short term trading ideas in the QQQQs. Last week, I picked up 50 QQQQ Mar 43 calls at $1.64-total investment about $8200- closed today at $1.98 for a pre trade fee profit of about $1700.

All in all, a good day with $2700 in trading profits on a couple of short term gambles.

I might have left some profits on the table over the next few days, but in light of market conditions I prefer to stay light on my feet.

Decided to jump into my suggested Time Warner trade.

Bought 100 March 16’s- TWX.CQ- paid $.65- total investment of $6,500- looking for a reasonable market environment and a little price improvement.

Stop Loss- Options are a little different- I take my cue from the common. If the common trades down to $15.90, I’ll just sell the options wherever they are trading.